Pre-Opening Corn Market Report for 8/3/2012

December corn was trading 2 cents lower near 7 am central time. The corn market traded a narrow range overnight after yesterday's losses. Dalian corn futures were lower overnight. Outside markets have recovered after yesterday's loses as investors await fresh US jobs data. The ECB disappointed markets yesterday after offering no additional monetary stimulus. US Stocks are trading higher this morning while the US Dollar is lower following yesterday's sharply higher trade. Today marks the 9th week of the rally in the corn market; however the last two weeks have been more consolidation than anything. The bull camp is in desperate need of fresh news as weather is no longer the "big" story for the corn market. December corn traded a narrow range overnight as traders are unwilling to establish or extend fresh longs positions at these lofty price levels ahead of next week's USDA report. The macroeconomic environment isn't helping either and was likely the catalyst for the lower trade yesterday after the FED, BOE, and ECB successfully disappointed investors. The ongoing debate in the corn market is no longer about yield, but if and when demand will be reduced enough to stabilize prices. Furthermore, if demand has not been rationed yet, how high must prices move to successfully do it? It is widely accepted that the market has done a better than expected job of cutting demand so far, in a fairly short amount of time. Ethanol production is drastically lower and exports have ground to a halt, despite yesterday's 1.516 million tonne purchase of US corn by Mexico. Feed wheat demand has also played a role as importers around the globe, like Japan, are using less corn in feed rations and more wheat. Bears are pinning their hopes on a cut in the Ethanol Mandate but recent studies have shown that blending economics suggest oil refiners will continue to use the biofuel. Brazil, Russia, and Ukraine have all benefitted from the rise in US grain prices as each of the countries continue to sell to markets in the Middle East and Asia. Russia exported 2.1 million tonnes of grain in July and it is estimated that they will export 2.5 million tonnes in August. The export outlook for much of the Black Sea region will hinge on total wheat and corn production. The USDA currently estimates corn production in Ukraine at 24 million tonnes. Some feel a cut of 4 million tonnes is needed due to the drought this year. This could ease sales going forward and shift demand back to the US if cash prices soften following harvest this fall. Cash markets remain weak in the interior US and Gulf export channels this week. However, reports that 2 vessels have run aground in two locations on the Mississippi could tighten logistics and pull basis higher nearby to get grain moving.